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Once bitten? Twice shy? Triple check in the box!

Evgenia Loginova Oct 28, 2022 5:16:38 PM

Why working with fintech providers make sense and how to minimize your risk

It can’t have escaped you, believers and cynics alike read the stories around the demise of Wirecard early July. The Sunday Times cut to the case on Sunday July 5 with: “The Financial Conduct Authority (FCA) froze the activities of Wirecard’s UK subsidiary, Wirecard Card Solutions, meaning that Curve and other banking apps relying on it to process transactions suddenly received complaints from customers unable to access their money.”

Soon the debate was raging, is this the end of our belief in the new world of fintech? Chris Skinner was quick to frame it with sense by marking out that not the entire fintech industry is at stake here. The fraudulent management, the accountant and the regulator had to do some soul searching in his view, but we should surely not write off Banking as a Service. In fact Wirecard brought a lot of innovation to the industry in Europe and we thousands of Wirecard staff were doing the right thing, misled like all of us.

Soon lists were circulating with alternatives to the Wirecard service, which made ultimate sense for instantly many issues had to be addressed. Not only was Wirecard a financial technology company, it was also a neo bank and a white label provider to other fintechs. This is a model we see more and more these days as we do not wish to repeat our sins of the past: build everything a bank or financial services provider needs inhouse at the expense of a total focus on infrastructure, rather than the customer and a massive R&D investment in technology that in its core is not very unique. How a bank deploys it, innovates around it and build services on top of all the data and insights they gain makes the difference. So why build if you can buy or even better use an end to end service?

We all feel cheated when events like this happen in fintech. We all want to pull innovation off the page and into real life and believe in the ‘newfound’ safety of digital and the security of a multi-tenant ecosystem. Many eyes see more, but does the culture support new ways of doing business too?

Just these three lines alone, already define how many challenges businesses face today. And it all must be done and there is no time to waste. So we do come up to a point where we have to make choices. Do we pour our capital into buying technology and amassing large tech teams as a bank or payments provider, or do we channel those funds and brains towards business development with our clients? With listing to them and tuning our business, whilst someone else runs the technology infrastructure, maybe even the processes too?

Over time bureau-based services as this model was called in the 80s got a bad rep for little choice was offered. The basic choice was bronze, silver of gold and where would you like the logo on the page? Without being demeaning, in many places this is still the case. And it does not have to be this way. Once you understand the complexity of payments and deploy new tech, choice can be offered at a reasonable price, but that does require volume and a dedicated skilled team. And such a team requires volume too to be an attractive place to work and a challenging environment in which to innovate.

Compliance is a second excellent reason to consider moving your payments operation into a white label environment. Operating in one jurisdiction is a tough, in more a challenge or even a total focus. Regulation will increase and so will the intolerance with failure. Parties that purely focus on running a service, rather than connecting with end customers can afford to be totally compliance focused. In fact they cannot afford not to be. ‘Too vital to fail’ on the security and compliance front is the best guarantee one can get.

2019 is proving to be an unsettling year for all of us, but the payment system has not failed us, thanks to all of us working together. Let’s see what more we can do together, for globalization is here to stay, digitisation will increase at a rapid pace and customer behavior can change as now have seen and experienced. Change is a constant was never truer, and also: embrace the eco-system. Do not shy away from fintech now but embrace it. Many industries went before us, fintech’s time is now.

Once bitten, twice shy, choose your partners wisely for and make a triple check in the box: scale, de-risk and innovate.